India is better positioned to cope with external financial shocks than most emerging market economies, International Monetary Fund head Christine Lagarde was quoted saying, just ahead of a of a crunch meeting of the US Federal Reserve. The Fed is expected to signal an increase in its ultra-low interest rates by as soon as June, potentially triggering capital outflows from emerging markets that have been flooded with cheap dollars.
In September 2013, Ben Bernanke, then chairman of the US Federal Reserve, caused a heavy selloff in the Indian rupee, bonds and stocks when he announced the Fed was to scale back its $80 billion a month quantitative easing programme. Now, Lagarde said in an interview with the Times of India before a two-day visit, India is in better shape.
During her two day visit to India Lagarde is expected to call on Prime Minister Narendra Modi and Union Finance Minister Arun Jaitley. “India has prepared better than most emerging-market economies for any such external shocks,” Lagarde said, adding that India had shrunk its current account deficit and boosted its stock of international reserves. Lagarde was due to give a speech in New Delhi and will meet officials from the Reserve Bank of India in Mumbai.
Last week, the IMF said in an annual report that India’s economy is recovering. But growth, which it forecast at 7.5 per cent in the fiscal year starting April 1, would fall just below government expectations.